While multifamily housing starts in 2018 came very close to the sector’s 2015 peak, production levels are expected to moderate somewhat in 2019 and will stabilize in a range that that is considered normal, according to industry experts at a press conference today during the National Association of Home Builders (NAHB) International Builders’ Show in Las Vegas.
“Multifamily starts will begin to level off through 2019, edging 2 percent lower this year at about 379,000 units, approaching the level that was the pre-recession norm,” said Danushka Nanayakkara-Skillington, AVP, Forecasting and Analysis for NAHB. “The great majority of 2018’s units were in buildings with 50 or more apartments.”
While the multifamily recovery led housing out of the recession, the single-family market has not rebounded as strongly. In addition, the rising cost of land and building materials in 2018 and the contraction in the labor force for skilled subcontractors and other construction labor has pushed the cost of a new single-family homes beyond the reach of many young families, many of whom continue to rent.
However, there is growth in single-family rentals—representing 3.67 percent of the single-family market in 2015, rising to 4.25 percent by 2017. This growth will take a bite out of both the single-family for-sale sector and the multifamily sector, as young families burdened with student debt, finding it difficult to save for a down payment, opt to rent a single-family home.
”Multifamily starts broke previous annual starts records in November 2018,” said Steve Patterson, president and CEO of Related Development, an arm of Florida-based Related Group. “Many development firms, including Related Development, expect to be just as productive next year. That said, it’s becoming more difficult to find appropriate sites in the areas where we want to build multifamily, and it’s more difficult for our builder partners to find subcontractors and labor. But the renter population continues to grow, so it’s unlikely that overbuilding will result in problems. Affordable and workforce housing is especially challenging due to high development costs today.”